Landlords can increase the most value of their buy to let homes by up to 20% by adding a bedroom, bathroom or extension, according to a leading building society.
Extensions or loft conversions add the most to a house price – by raising the value by a fifth.
Finding space for an extra bedroom adds 10%, while a bathroom lifts the value by 5%, says the Nationwide.
Research by the buy to let lender shows buyers are prepared to pay more for extra space.
Reviewing house prices before and after improvements showed increasing floor space by 10% adds 5% of value.
As an added bonus, the cost of the improvement is fully deductible against any capital gain tax due on the chargeable gain when the property is sold by investors.
Robert Gardner, the Nationwide’s chief economist, said: “We re-examined the factors that affect the value of homes, and the potential to add value.
“Having more useable space is generally thought to be consistent with better quality accommodation and people are prepared to pay for it. A 10% increase in floor space, other things being equal, adds 5% to the price of a typical house, whilst adding space equivalent to the size of a typical double bedroom to a two bedroom house can add around 11% to the value.
“A second bathroom also remains a favourite amongst homeowners and our research shows that creating an additional bathroom can add 5% to the value of the average house.
“Homeowners that add a loft conversion or extension incorporating a double bedroom and a bathroom can add about 20% to the value of a three bedroom, one bathroom house.
“Households appear happy to pay for more space and our analysis suggests that, providing the room is useable, adding an extra bedroom can be a good way to increase the value of a property.”
The study also gives some clue to calculating property value – a one bedroom flat costs around £4,200 per square metre, while a four bedroom house is priced at £2,000 per square metre.
Nationwide lends to buy to let landlords through subsidiary The Mortgage Works.